Buy Before You Sell: Making the Move Before Your Home Is Sold

You found the right home, but your current home hasn't sold yet. Do you have to sell first?

Not necessarily.

There are several strategies that may allow you to purchase your next home before selling your current one. The right solution depends on your income, equity, savings, timing and overall financial picture.

Qualify With Both Homes

The simplest solution may be qualifying while temporarily carrying both properties. If your income and debts allow it, you can purchase the new home and sell your existing home afterward.

Use Assets to Help Qualify

For some Freddie Mac loans, eligible financial assets can also be used to create additional qualifying income. Generally, eligible assets are converted to a monthly amount by dividing them over 180 months.

For someone with significant savings or investments, this can potentially provide additional qualifying income and help make carrying both homes possible. Specific eligibility requirements apply.

Access the Equity in Your Current Home

A bridge loan may allow you to access equity from your current home for the down payment and closing costs on the next one. Depending on your situation, a home equity line or other equity-based financing may accomplish something similar.

Make a Smaller Down Payment Now

Another option is to make a smaller down payment rather than waiting for the proceeds from your sale.

After your old home sells, you can apply some or all of the proceeds toward the new mortgage. If your loan allows a recast, the lender can then recalculate your monthly payment based on the substantially lower loan balance, without refinancing or changing your existing interest rate.

Temporarily Reduce the New Payment

If carrying two homes creates a short-term cash-flow concern, a temporary interest-rate buydown may reduce the payment on the new home during the first year or two.

This can be particularly useful when the seller or builder provides a concession that can be used to fund the buydown.

Make the Purchase Contingent on Your Sale

You can also make your offer contingent upon selling your current home. This reduces your financial exposure, although a contingent offer may be less attractive to a seller in a competitive market.

Your Existing Home May Be Treated Differently Once Under Contract

Mortgage guidelines may provide additional options when your departing residence is already under contract or when certain requirements are met. This can potentially change how the existing mortgage payment affects your qualification.

The Best Solution May Be a Combination

Sometimes we don't need one solution, we use several.

You might make a smaller down payment, use a temporary buydown to reduce the initial payment, sell your existing home several months later, apply a substantial portion of the proceeds to your new mortgage, and then recast the loan to permanently lower the payment.

The goal is to give you enough flexibility to move first and sell second without unnecessarily rushing either transaction.

The Advocate Difference

Buying before selling isn't simply about finding a bridge loan. It's about looking at your income, assets, equity, cash flow, timing and both homes together.

I'll help you compare the available strategies, understand the costs and risks, and determine which approach makes the most financial sense for you.